The Australian dollar had wild end to November

Yann Riou/Dongfeng Race Team/Volvo Ocean Race via Getty Images

The Australian dollar endured another choppy session on Thursday, rising steadily in Europe before giving back those gains and more in North American trade.

Those moves largely reflect conflicting forces on the US dollar with ongoing speculation about tax reform offset by renewed political uncertainty.

Here’s the AUD/USD 5-minute chart as at 8.10am AEDT.

Elias Haddad, senior currency strategist at the Commonwealth Bank, said the Aussie’s fluctuations were largely due to conflicting forces on the US dollar.

“The US core PCE deflator, the Fed’s favourite inflation gauge, came in line with expectations at just 1.4% per annum in October, the same annual rate as the previous month,” he said in his morning note.

“The core PCE deflator has been below the Fed’s 2% objective since May 2012, reinforcing expectations the FOMC’s interest rate normalisation process will remain gradual. This will limit USD upside.”

While that initially weighed on the USD, those moves were reversed later in the session on the back of increased optimism that US tax reforms will be delivered.

“10-year US bond yields rose sharply to near a one month high of 2.43% after US Senator John McCain announced his support for the Senate tax bill,” Haddad said. “McCain’s support raises the likelihood the Senate will approve the pro growth tax bill this week which is USD positive.”

However, renewed political uncertainty kept the dollar’s gains in check with reports surfacing that US president Donald Trump is looking to replace current US Secretary of State Rex Tillerson.

As seen in the scoreboard below, while the Aussie is almost unchanged against the greenback, it put in a widely varied performance against the crosses.

AUD/USD 0.7565 , -0.0005 , -0.07%
AUD/JPY 85.13 , 0.41 , 0.48%
AUD/CNH 5.0023 , -0.0019 , -0.04%
AUD/EUR 0.6354 , -0.0035 , -0.55%
AUD/GBP 0.5593 , -0.0051 , -0.90%
AUD/NZD 1.1065 , 0.0067 , 0.61%
AUD/CAD 0.9758 , 0.0019 , 0.20%

The UK pound was the standout performer during the session, gaining on continued optimism over an improved tone in Brexit negotiations. The euro also put in a strong performance, possibly gaining on month-end position adjustments.

At the other end of the spectrum, the Kiwi was hammered lower following a sharp slump in business confidence following the recent Federal election.

Turning to the session ahead, it’s going to be a busy one for traders with a smattering of major data releases both in Australia and abroad.

Domestically, the Ai Group will release its November Performance of Manufacturing Index (PMI) for November at 9.30am AEDT. That will then be followed by CoreLogic’s Hedonic Home Value Index for November at 10am AEDT.

Regionally, data highlights include New Zealand terms of trade, South Korean GDP and CPI along with inflation, household spending, business CAPEX and unemployment from Japan.

There’ll also be a swathe of manufacturing PMI reports released across the Asian region, including from China, Japan, South Korea and India.

That theme continues into the second half of the session with PMIs from the Eurozone, UK, US and Canada all scheduled to hit.

Outside of the PMI deluge, Canada will also release GDP and unemployment data while construction spending figures for October will be released in the US.

Of all the releases, the US ISM manufacturing PMI and Canadian data releases carry the most potential to be market-moving.

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